The Krona Is the Best Currency on Forex. Forecast as of 19.12.2025 | LiteFinance
For a long time, Sweden’s economy stagnated. However, large-scale fiscal and monetary stimulus, along with increased EU defense spending, helped revive it. As a result, the krona is set to become the best-performing G10 currency. Let’s discuss it and make a trading plan for USD/SEK.
The article covers the following subjects:
Major Takeaways
- Sweden’s GDP could grow by 2.9% in 2026.
- The Riksbank intends to raise interest rates.
- Monetary policy divergence supports the krona.
- Short positions in USD/SEK with a target of 9.00 remain relevant.
Quarterly Fundamental Forecast for Swedish Krona
The days when central banks followed the Fed like a pack leader are over. Each now acts independently, guided by domestic economic conditions and inflation. This creates an ideal environment to capitalize on monetary policy divergence — the main driver of exchange rates in the Forex market. The Swedish krona has taken advantage of this dynamic and is set to finish 2025 as the top-performing G10 currency.
Pauses come in different forms. Meetings of the Bank of England, the ECB, and the Bank of Japan pushed developments elsewhere into the background, yet there was plenty to note. The Riksbank kept its key rate at 1.75% and signaled that the next move would be a tightening of monetary policy. By contrast, Norway, which maintained borrowing costs at 4%, left the door open to continuing monetary easing.
At first glance, this may seem unremarkable. However, Stockholm is seeing inflation slow to 0.3%, while Oslo is accustomed to inflation at 3% or higher. Why, then, does the Riksbank plan to raise rates, and why is the krona leading the G10 and showing its strongest performance against the US dollar since 2003?
Swedish Krona vs. US Dollar Dynamics
Source: Bloomberg.
For some, it’s a crisis, for others, it’s an opportunity. Sweden and its companies have benefited from the EU’s intention to increase defense spending amid the armed conflict in Ukraine. By adding fiscal stimulus and cutting the key rate from 4% in April 2024 to the current 1.75%, Stockholm succeeded in accelerating economic growth. At its latest meeting in 2025, the Riksbank raised its GDP growth forecast for next year from 2.7% to 2.9% — twice the EU average.
Sweden’s Economic Performance
Source: Bloomberg.
As for inflation, it is not only the Fed that views recent dynamics as temporary. Sweden’s central bank expects consumer prices to return to the 2% target by 2027, supported by a strong economy and improving labor market conditions. It is therefore unsurprising that Deutsche Bank expects a rate hike by the end of 2026, while the futures market prices in about 22 basis points of monetary tightening — equivalent to one policy tightening step. Diverging paths from the Fed allow JPMorgan and Bank of America to remain bearish on USD/SEK. CIBC expects EUR/SEK to reach 10.5.
Unfortunately, the “slow and steady wins the race” approach does not help Oslo. The Central Bank of Norway fears persistently high inflation and has cut rates only twice in the current cycle. The futures market expects two more cuts amid an economic slowdown, bringing the 2026 rate to 1.3%.
Quarterly Trading Plan for USD/SEK
The monetary policy divergence provides a foundation for selling USD/SEK with a target of 9. Because the Fed has paused its rate-cut cycle, the pair may see a short-term rebound. However, pullbacks from resistance at 9.365 and 9.24 should be used as selling opportunities.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of USDSEK in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
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